Study: Enterprises – not startups — will lead next wave of disruption

A study conducted by tech behemoth IBM said the next wave of disruptive innovation will be led by the incumbents or existing enterprises, posing a significant competitive threat to new entrants and digital players.

The study showed that 72 percent of surveyed CXOs claimed that incumbent organizations – rather than new entrants – are leading the disruption in their industry. By comparison, only 22 percent say smaller companies and start-ups are leading disruptive change.

In IBM’s 2015 study, findings showed that 54 percent of C-suite executives expected more competition from other industries, while the latest study showed that number dropped by half to 26 percent just two years later.

The report said incumbents have become smarter about leveraging valuable data, honing their employees’ skills, and in some cases, acquired possible disruptors to compete in today’s digital age.

The study also provided insights into the following:

• Data has become the established companies’ most powerful asset with incumbent enterprises owning 80% of the world’s data, which along with their employees they are using it to create new competitive advantages.

• Core expertise is more important and more relevant than ever. Those who use it wisely, with the help of AI, will win.

• 57 percent of disruptive organizations are builders or owners of a platform business model.

• Organizations of all kinds have scrambled to take up the art of the personalized customer experience – in fact, 68 percent of surveyed CxOs expect organizations to emphasize customer experience over products.

• This year, people skills rose sharply from fifth to third place as an area that would most impact organizations. In the past, a focus on people skills often centered on skills gaps, especially technology skills.

The study noted that until a year or so ago, the conventional wisdom was that big, mature companies were on the defensive, that the world’s incumbent businesses were at risk of being disrupted – and supplanted – by startups and digital challengers.

“Of course, there was some truth to this. Many companies have gone through an initial phase of disruption by new entrants and digital native start-ups in every industry. It was driven mostly by platforms that can distribute things. This phase, however, is now ending,” the report said.

”We are about to enter a new era for business – one defined by ‘the incumbent disruptors’. In this era, companies with a past have a built-in advantage not easily replicated or leapfrogged by newcomers.”

A major reason for this finding, the report said, is that only 20 percent of the world’s data is public or in the Internet.

“The other 80 percent is enterprise data. It’s not searchable. It’s behind the firewalls of organizations and institutions… in their workflows, supply chains, etc. It is infused with their deep knowledge, experience, and expertise,” it said.

Another factor is that the tools to harness this data are now available for enterprises. “AI, blockchain and the cloud — these are going to be tools that incumbents can use, not tools used against them,” it noted.

“By leveraging proprietary data, decades of industry specific expertise, and emerging cloud, AI and blockchain technologies, those incumbents will out-innovate the so-called disruptors of the last decade,” it concluded.

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